We are pleased to continue our support and sponsorship of Engage Exploit Invest (“EIE”), EIE attracts over 160 investors from around the World and gives investors and serial technology entrepreneurs the opportunity to meet with a large number of Scotland’s high-potential companies in a short space of time. It offers a terrific opportunity to the best of our new companies to get intensive presentation training and to showcase their companies to an international audience.
The below guide was drafted with those companies pitching for investment at EIE in mind but some of the tips will be relevant for all existing and potential employers.
Legal Advice for Start-ups - Hiring Your First Employee
Developing your startup business to a point where you’re ready to employ someone is a real achievement. If you haven’t already reached that stage, hopefully a successful pitch at EIE will soon put you in a position where you are able to do so. Recruitment is also a bit daunting if you haven’t done it before, and comes with a lot of responsibility. The following five tips should help guide you through the process.
1. Think carefully before employing someone
From our experience, the questions a small business should ask itself are:
- Are you really ready to take on someone new? Is there a fully developed job to be carried out at this stage? Sometimes companies can be too early in taking someone on: for example, sales people when your product isn’t actually at the point where it is marketable. Think long and hard about whether you’ve really reached this stage. Remember that it costs a lot in time, effort and money to bring someone on.
- Do you really need to bring someone on as an employee rather than just a contractor or consultant? Some roles are so key and integral to an organisation that they really have to be an employee – e.g. CEO, CTO, CFO (they need to be fully committed and this is the impression that you’ll want your clients and investors to have) but other roles may be done just as well by contractors (e.g. business development roles or marketing roles), which makes arrangements a lot more flexible and requires less commitment from both parties.
- Remember that having an employee is a real commitment: employees accrue employment rights from day one, you need to deduct tax from them and you need to give them paid holidays and sick pay. It’s therefore important that you make the right decision.
2. Find the right person
Assuming you’ve decided you do need an employee, recruiting is a big step for a small business but taking on your first staff member is a special milestone. It’s a cliché, but good people can be your most valuable asset. You need to find the person with the necessary skills, knowledge, expertise & qualifications to deliver business objectives. And it’s crucial to have the right person in the right place at the right time. Employing the wrong person or the right person at the wrong time can prove disruptive and costly!
In order to find the right person, it’s important to have an effective recruitment process, which creates a positive image of the business. Applicants are like customers so you should treat them in the way in which you would like to be treated.
- Start by writing a job description which really helps to pin down exactly what the role is and if this is specifically defined there’s a better chance that you’ll find someone who really understands the full remit of the role and really wants and is able to do it, and there will be less scope for disputes later on. List the main tasks, responsibilities and objectives as well as wages, hours, location and basis ( ie full time, part time, fixed term or temporary).
- You should also write a person specification but focus purely on the job requirements. Include knowledge, skills and qualifications - essential and desirable.
- Advertise only where you'll reach likely candidates. Advertising online is popular, effective and cheaper than newspapers etc (although local newspapers remain popular). Recruitment agencies are another option and can save you a lot of time and leg work. Make sure that the agency has experience in your sector before engaging them.
- Think carefully about your selection process. How are you going to do it? A series of interviews? If so, have you prepared the questions? It’s important to be consistent. Compare applications against the post’s requirements and person specification. Shortlist candidates whose experience, knowledge and skills match those you seek. Invite shortlisted candidates to interview.
- When making a decision be objective, systematic and fair. Will there be more than one selector? Is there a scoring process? Think about providing feedback to unsuccessful candidates and maintain records so you can explain why you chose one candidate over another.
3. Registering as employer with HMRC
Once you’ve found the right person you should then register with HMRC (in good enough time before you have to give the employee their first pay cheque). You normally need to register as an employer with HMRC when you start employing staff and you meet certain conditions. Remember that you must register before the first pay date. Registration can be carried out online on HMRC’s website.
You’ll also need to set up PAYE (Pay As You Earn). This is the system used by employers to handle tax and National Insurance contributions due on employees’ pay. Detailed PAYE tax calculations and processes can be complex, but payroll services or software can make things much easier for you so may want to outsource PAYE to a payroll service provider (your accountant may offer this, often on a fixed fee basis).
5. Job Offer /Contracts
So, you’ve done the job description, advertised, interviewed, registered with HMRC and set up PAYE. You now need to decide on a successful candidate, offer them the job and then send them a written job offer. What information has to go into that offer?
- The job title of the job that is being offered, any particular features of the job such as it being for a fixed-term or a part-time position, and the starting salary.
- The terms of employment either as set out in the offer letter and/or in an enclosed contract/Statement of employment particulars and/or in an enclosed staff handbook. Holistic HR can help prepare job offer, standard contracts, policies and handbooks for you, all for a fixed annual fee.
- If there have been any discussions or negotiations about the job, in order to avoid any confusion, the employer may wish to state that the offer on the terms provided supersedes any previous discussions.
- Any conditions to which the offer is subject, for example, receipt of satisfactory references, right to work in the UK and disclosure checks. For further information on employing overseas nationals, please see here.
- Any time scale within which conditions need to be satisfied and the employee needs to confirm acceptance of the offer (often by returning a signed copy of the letter and/or enclosed employment contract).
Remember that the Statement of employment particulars must be given to employee within 2 months of them starting. The statement must contain the specific information such as pay, hours, holiday entitlement, job title, place of work, sick pay etc.
As mentioned above, taking on an employee is a significant commitment. Once the applicant has accepted the job, this is just the start of the relationship. It’s then important to carry out a thorough induction and then ensure that the employee is properly managed and nurtured through training and regular appraisals in order to make the most of their potential.
Contact our Employment Law & HR Support team in Edinburgh & London
If you would like to discuss your plans for recruitment further or would like to find out more about Holistic HR, please do not hesitate to get in touch with Hannah Roche at MBM Commercial. We also work closely with Mazars, McGill & Co, WorkbaseHR and Eden Scott should you require further guidance in relation to accountancy, immigrations advice, HR software or recruitment.